A huge step backwards for the USPTO

The remaining legislation is mostly a hodge-podge of industry-specific provisions that will benefit large multinational corporations at the expense of U.S. innovation. This is why a broad spectrum of members and patent stakeholders has expressed opposition to H.R. 1249 in this form.

The bill would provide large banks a special, new bailout at the expense of small inventors and the American taxpayer, and even worse, would do so on a retroactive basis.

Several constitutional law experts, including Richard Epstein and Jonathan Massey, have suggested that this provision "is special interest legislation, pure and simple" and have concluded that the provision would constitute an unconstitutional taking of property, thus forcing the federal government to pay just compensation to the patent holders. Further, the provision may contravene the separation of powers, because it permits an executive branch agency to overturn a judicial determination.

The legislation would, for the first time in more than 220 years, convert the U.S from a "first-to-invent" patent system into a European-style "first-to-file" patent system, under which the PTO would award a patent to the first person who can win a race to the patent office.

According to constitutional scholars, this change overturns years of legal and legislative precedent, as well as a clear constitutional directive to Congress that requires patents to be awarded to the genuine first inventor.

Additionally, the Eagle Forum explains that the move to first-to-file "stacks the deck overwhelmingly in favor of large corporations who are better staffed and funded to file applications." Others, including independent inventors, venture capital funds and small businesses, have argued the "first-to-file system" would force U.S. inventors to prematurely disclose their inventions, thus providing Chinese firms and other foreign entities opportunities to unlawfully exploit U.S. inventions overseas where intellectual property enforcement is lax.

H.R. 1249 would also allow patent owners to provide corrected or new information to the PTO that was not presented or not accurately presented during the application process. Presently, patents are unenforceable and invalid if they are fraudulently obtained. This is why the Generic Pharmaceutical Association has observed that the bill "could reward patent holders that knowingly falsify information in their original patent application with the USPTO or intentionally omit material information."

Several universities oppose H.R. 1249 because it would expand the "prior user rights" defense to all patents.

Currently, businesses may claim prior user rights as a limited defense against patent infringement. If a method of doing business is later patented by another party, the prior user is not liable for infringement to the patent holder. Universities, and other non-profit institutions that perform critical research in this country, depend on publication and disclosure to advance their research and bring their products to market.

The Wisconsin Alumni Research Foundation contends that "any expansion of prior user rights would shift the constitutional principle of disclosure to a system favoring ... trade secrets [which] limit the dissemination of ideas," and that the bill could deter private investment in early stage innovation while encouraging multinational corporations to increase use of trade secrets.

The legislation also undermines the false patent marking statute by retroactively changing the law applicable to pending enforcement actions. The false marking statute prohibits manufacturers from falsely claiming that a product is or remains patent-protected beyond a 20-year term. Public Citizen has explained that this provision "would completely remove the incentive to stop intentional false labeling of products as patented."

We would urge Congress to pass the one reform that would truly enhance the patent system - ending fee diversion - and drop the other unnecessary - and potentially unconstitutional - industry-specific provisions.